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Worldwide Exchange

News/Business. Brian Shactman. Business news including in-depth analysis of worldwide trends.

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U.s. 49, Us 23, China 17, Christine 15, United States 10, Japan 8, Germany 8, S&p 7, Mike Huckman 6, Shanghai 6, Jud 5, Tokyo 5, New York 5, Hatoyama 5, Mike 4, Julius Baer 4, Stephon 4, Singapore 4, India 4, Aig 4,
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  CNBC    Worldwide Exchange    News/Business. Brian Shactman. Business news  
   including in-depth analysis of worldwide trends.  

    August 31, 2009
    4:00 - 6:00am EDT  

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cac lower by 1.5%. selling in the autos, germany, some of the chemicals and selling in some of the construction players out there, as well. just showing you the currencies and the cross trades we're looking at with a bit of activity in sterling against the dollar at the moment. the dollar also lower against the yen. all eyes focusing on japan today in the aftermath of that landslide victory to the democrats. and more more on that, let's talk about asia. hi, how are you. >> hi louisa. here in asia, not good things. two things, the china selloff. we'll get to that later. but louisa mentioned the victory by the democrats party. that saw the japanese yen getting bought up. sparing hopes that the new government may put in new measures and policies that spur consumer lending.
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the market wasn't impressed because stronger yen means exporters are getting hurt, pulling the market down 4.1%. take a look at these shanghai today really tanking 6.7%, but this particular market yesterday is still up some 60%. a little bit of correction, lots of concerns there about a curve in bank lending, new flood of issues coming online, also sending investors are really worried. and the housing down 1.8%, getting dragged down as a result and the bombay is down 1.62%. and for crude oil, this is how the fujs are looking the crude oil's down 63 cents, 72.10 a barrel, and brent always pulling back, as well, in line with what nymex is doing, $2.71, and brent, let's wait a while. no brent, we don't have brent, but it should be pulling, as well. mike, over to you in the u.s. how are you today? >> thanks, christine. doing well, thank you.
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hope you are too. and we're about 5 1/2 hours away from the opening bell here in the united states. and we do have the futures pointing toward a lower open across the board. basically investors doing a read through from what's going on in asia and china and barring a major meltdown in the stock market today. nonetheless, this could be the best stock rally, the best six-month rally, that is, since 1933. moving over to the treasury markets, even though we did see that slight selloff in the stock market on friday, we did see the price go up and the yield come down. that's continuing today at 2.3%, but maybe a pronounced selloff if we move on to the ten-year tee note. right now we have the yield pulling in again just a little bit at 3.4%. as far as gold is concerned, it did go up 1% in friday's
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trading, and it might be oil price related, christine was just talking about and also inflation fear-related, but we did see the price holding steady earlier, but it is retreating just a bit right now at down 2.75 at exactly $953 per troy ounce. christine, over to you. >> hey, mike, thank you very much for that. well, joining us now for market strategy, we have our panelist of course today, it is vice president private banking and head of asia pacific equities, amp capital investors. kerry, first with you. japan, new government plays, a lot of hopes this new government could put in place new policies, consumer spending, are you that hopeful? >> well, the japanese market is without doubt a cheap market now after two decades of d rating. but the problem for the government is that the property of the previous government faced
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the demographics is against them. the working age is declining in japan, that's a big drag on the economy. it's going to be very difficult for the government to have an impact quickly on the japanese economy, which would be reflected in the japanese stock market. i think it's pretty tough for the new government. >> okay, so wait and see still. >> what about china? this particular market tanking, down 6%, in line with the previous selloff we've seen in the past. this market is still up some 60%. healthy correction? is there anything to worry about here? is it going to give more risk about investing in equities? >> well, i think with the chinese domestic market, we've got to recognize it's a volatile market, largely driven by retail investors and they're reacting to news flow. concerns about government tightening policy, lower lending gross in the second half versus the first half. but i think as long-term fundamentally, we should be focussed on valuation, and with these markets pulling back, i think it's a great opportunity for investors to buy in again at
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the chinese market now coming back below long-term average valuation. so i would use these as buying opportunities and view them as healthy corrections. but accept there's going to be volatility. so, you know, i don't think we can call where it stops, but we can say it's now an attractive option to buy based on valuation. >> edith, what about you? do you view it as a buying opportunity like kerry was talking about? >> not so much, no. we have been playing the chinese market since the beginning of this year as others, of course. we have very good gains there, and we think it's time to take office in the chinese market and shift the money into the more established markets. we especially liked european markets right now since recovery is on the cards and will continue. so the chinese market we see endangered a bit also by rising number of ipos and, yeah, as we
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all know credit tightening is on the cards there also. i think a shift into a bit lower risk, lower assets like european but also u.s. equities is called for right now. >> this is mike huckman in the states and speaking of u.s. equities, today's "wall street journal" characterizes the recent rally that one revenue forgot. in other words, investors have been buying into improve profits that are on the back of extreme corporate cost cutting. do you agree that that's the case and that we really need to wait and see when or if revenue is going to grow again and grow at a sustainable pace? >> yes, but if as professionals look at markets now, we know these markets anticipate development. markets have been anticipating this whole round of cost cutting, this inventory build-up that we saw in the last couple
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of months, and now we're anticipating a pick up in demands at some point. and a recovery of margins. and of course, the margins will recover because inventories are very low, there is natural demands there. and consumers are turning a bit more positive. so that's always the aware, that the market anticipates around 6 to 9 months. it has proven to be the case in the last couple of months and we think this cycle will continue. so we're not all that worried about, you know, where we stand right now. it's where we're going to be in the rest of this year in 2010. >> so, kerry, in the meantime, though, do you expect the typical september-october pullback especially after the very healthy rally that we've had recently? or do you think that it's kind of a contrarian viewpoint that when everybody's expecting the pullback, that it ain't going to happen?
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>> well, my general idea is try to avoid calling markets on a month to month basis and look at valuations and say is this an attractive level i should be buying into markets? and my view for global equities and in particular asian equities, which we focus on at amb capital. if there is a pullback, i would be encouraging investors to buy into that, i have to say many investors i speak to are still relatively defensively positioned. and therefore, you know they're looking for a pullback. that makes me think if there is one, it'll be relatively shallow. >> and on that point, kerry, people are looking for a pullback, but they're not putting their money where their mouths are. some of the latest data we were looking at indicates that insider selling has picked up during the month of august. is that an indication of what's going to be coming? is that an indication of actually more the putting your
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money where your mouth is talking happening during september? >> i don't think so. the history of insider dealings is that they have been very good at buying, and not so good at selling. so i don't think i'd take a lot from that. i think if you look at many funds around the world, many other investors that became too defensive through late 2008, the early part of this year, they've been surprised how fast the markets have moved. and they want to put money into the market. but even after these increases we've seen in the markets, they've come from extreme low valuations. we're only back in the case of asia to the long-term average with other markets with below long-term average. i find it hard to believe we'll have a significant pullback. if we do, you get to buy these markets again at a cheap level. >> i was intrigued by what you say that you think recovery is on the cause and it will continue and in particular you are looking more towards the
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mature markets that says the european markets now. why do you think necessarily that europe is going to outperform what we're seeing in asia despite the fact that we have had this run and rally. europe is still in for a couple of knocks if you look at the jobless figures heading north and the monetary policy of implementation that have to be unwound at some point. we're likely to be hit by that once that really starts. >> yes. well, on your latest monetary policy, we don't think we will see a tightening any time soon in europe. basically, yes, recovery is still quite weak, but it is driven by recovery in other markets. asia, but also now u.s. and that always has a very positive effect on europe. european exports and, of course, the consumer. yes, unemployment levels have crept up. but let's not forget that the laws that have been laying off temporary workers, workers that were on short contracts, they
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can be rehired pretty quickly again and we already see that happening in germany, for instance. and those are the numbers are less than people thought it would be. and at the same time, the recovery seems to be much stronger than people have anticipated. so we can't be all that negative there, and so we do think, especially with large corporations that there's a lot of catch up to be done, large corporations are highly international, very strong balance sheets, and they can take advantage of the situation by expanding market shares, or taking over the role of private equity to a certain extent also, there's less competition for assets for these companies. so the outlook is really quite bright. >> it is -- thank you very much. it's a hard one, though, you don't want to miss out on a further rally, but you don't want to put all your money in somewhere if it's too late. thank you. head of asia pacific equities from amp capital investors.
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the chancellor's party has suffered losses in the recent elections. the setback could help her chances of setback next month. they hold a comfortable lead in national polls over their main rivals the socialist democrats. but a christian democrat saw their support fell sharply in the final weeks in 2002 and the 2005 campaigns. and the regional results may increase fears of another pre-election slump. in switzerland, top swiss private bankers say they're confident they can avoid a u.s. tax investigation on the same scale of that suffered by ubs. according to the financial times, the executive at credit suisse are convinced they have enough to prevent. meanwhile the french budget minister says france has its names on clients from secret accounts saying the assets total
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an estimated $3 billion. christine? of course a big story in japan, voters there swept the opposition party to a historic victory over the weekend, ending in almost unbroken 50-year rule by the liberal democratic party. the ldp lost two-thirds of the lower house seats to the democratic party of japan or dpj, breaking a deadlock in parliament. the new government headed by hatayama has pledged to help revive an economy struggling with record high unemployment and deflation. he's expected to name his cabinet within the next two weeks right after being sworn in as prime minister. japanese yen to a seven-week high against the dollar right now trading at 92.80. staying in japan, output rising to 1.9% in june, thanks
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to rising of the demand. that's the fifth straight months of gain and indicates japan's slow recovery after entering recession late last year. meanwhile, retail sales painted a grim picture of the consumer after registering a 2.5% drop in july from a year ago. it's the 11th consecutive month of decline, but was less than 3.6% drop the market expected. and business economists are split on whether the fed's massive infusion of cash into the economy will spur higher inflation over the next few years. in this latest poll by the national association for business economics, half the forecasters say the fed's decision to increase the money supply won't lead to inflation. some 41% disagreed citing an ineffective exit strategy as a main concern. members were more in agreement on overall monetary policy with 70% saying it was about right. more than half believe the fed
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will keep interest rates stable over the next six months. and congressman barney frank, the chairman of the u.s. house financial services committee is planning legislation to subject the fed to a complete audit. at a recent town hall meeting, congressman frank said the bill would crack open the central bank's books, but not in a way to undermine the fed's independence on monetary policy. frank also says the house will move to curb the emergency lending powers to non-bank firms. both measures will be part of the broader financial regulation overhaul bill that is likely to pass the house in october. and as always, you can get more news, videos, and blogs on today's market moving news at cnbc.com. louisa. >> yes, and send your e-mails, as well as worldwideexchange@cnbc.com. what does this mean for national elections next month?
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no doubts about the results in the japanese elections, though, the opposition has ended half a century of ldp rule. but what next? we are live very shortly. stay with us, we'll also be talking about the commercial mortgage market. is that the next shoe to drop? we'll investigate how this sector is putting fresh pressure on u.s. banks. more to come. welcome to the now network. population: 49 million. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. eight are wearing bathrobes. two... less. - 154 people are tracking shipments on a train. - ( train whistles ) 33 are im'ing on a ferry. and 1300 are secretly checking email...
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hello, welcome back, you're still watching "worldwide exchange" on cnbc. on to our global market round-up.sylvia, and we've also got ana in singapore. let's kick off with you, sylvia, and what we are looking at in germany today in the aftermath of these regional elections. >> yes, we certainly have the elections to digest, that added to the general sense of profit-taking consolidation. but let's make no two words about this. this was really the chinese slump that hit us first and foremost. and over the weekend before the weekend we had an inkling we were starting to take money off the table again. and the outcome of this weekend's elections here in germany with heavy losses for both the big parties, but mainly for cdu for the christian
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democrats that added to the sense of let's say insecurity about the political landscape in germany because one month ahead of the federal elections, it's never good news if you don't quite know what's on the table or what's the likely outcome. it's almost the hope that we're going to get a grand coalition again because a center right coalition with the christians seems unlikely, and there is the looming fear, i want to keep this neutral, but fear for business that we could see a less left coalition, triparty coalition between the socialist left, the greens, and the social democrats and that's something that business would not like very much. aside from that, of course, the market a little bit in profit taking mode. i told you before, the 5572, this year's high, and whenever we get significantly higher above the 5500, we take money off the table.
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they all think the next dip is around the next corner. what's up in paris? >> all of the banks are trading lower as the french government decided to step up the campaign. will meet with the french banks on financial institutions later this week. to ask them to give the details of all the clients who have investments abroad recently, transferred significant amount of money to the french bank this weekend. that the government has least of 3,000 people suspected of tax evasion. bank accounts in switzerland reaction in the financial sector, profit taking after very positive performance last week. also trading lower on some fresh reports saying that the company is going to change its strategy in the upper segment. they have no plan to replace its cycle.
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it cannot just justify the current strategy, one of the biggest decline this morning. over to singapore to have a look on the asian markets. hi, adam. >> thank you very much, stephon. well, the big elephant, it was a one-way bet for this market sinking all day hitting a three-month low here. as we wrap up the earnings season for the first half of 2009. there's a real sense that corporate profits haven't kept up with the pace of gain we've seen on this market which until the end of july has seen a year-to-date gain of 9%. apart from valuation concerns, there's a lot of concern about new share supplies coming to the market. we've also got china, going to be raising $2.3 billion u.s. in the shanghai slated for september as well as that existing companies also planning to raise more capital. last week we heard from china
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banker raising $1.6 billion u.s. they're saying they're going to be raising more than original expected at 2.6 to $3.2 billion, it's got to keep up with ratios set by the chinese banking regulators. as a result of that. we saw heavy capitulation across the banking stocks, amid slower lending in the month of august. a lot of these banks have seen big dropoff down to about $200 billion versus $360 billion in july and the average of $1 trillion over the first half of 2009. and a lot of this money ends up in the stock markets, that's why we saw heavy selling across the banking stocks and the brokerage stocks, as well. with that i'll hand it back to mike in the u.s. good morning. >> thanks, adam, and good afternoon to you. it's an awfully busy week for economic data here in the states with reports on manufacturing, productivity, the minutes from this month's fed meeting, and of course, the non-farm payroll
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data on friday. the august chicago pmi, kind of a read on manufacturing activity out at 9:45 a.m. new york time. and also looking for a reading of 48.1, up nearly five points from july, and that is your global stock watch. well, coming up on "worldwide exchange," an historic moment for japan as they sweep the opposition to power, ending 50 years of rule by the liberal democratic party. we'll have the full reaction and analysis for you shortly. plus also, elections are in the headlines in germany. the party has suffered a setback. do these regional setbacks bode well for the cdu with national elections four weeks ahead? stay with us. more to come.
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♪ love stinks! i'm christine tan in asia and japan, ushers in a new government, meanwhile the nikkei slides from the 11-month peak. >> in europe, lower and slower, trade is pretty quiet with london closed for a holiday. >> and i'm mike huckman in the united states. this final week of summer could be anything but relaxing for investors with the crucial jobs report coming out on friday.
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crucial indeed. well, today as said the uk market is off for a holiday. lucky people out there, bank holiday monday. but the rest of europe is trading and we open on a slight down footing this morning, lower by approximately .6% on this broad based index. let me show you the markets that are open. is smi in switzerland, the dax in germany, and the cac in france. a little bit more when it comes to germany when we're seeing a bit of selling in some of the autos like daimler helping to pull down the index. but currency markets have been interesting because of the landslide election victory, of course, in japan over the weekend. giving a little bit more imptous. you've got sterling dollar, a little bit lower down by .4%. but a lot of other things taking
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place in asia, as well. christine? >> hey, louisa, besides what you mentioned about elections in japan, of course, an election outcome in japan, the lest of the markets here in asia were hit by risk aversion coming to china. this tanking more than 6%, 6.7% to be exact. lots of concerns about drop in bank lending. also concerns about a new flat of equity shares, write issues coming on to the market from china bank. in the end, hunzinger dragged down, as louisa mentioned, the spike in the yen, obviously dragged down the exporters sending the nikkei lower 6.4%. and it looks like the u.s. is going to follow suit when the opening bells ring in about five hour's time. we do have the futures up pointing toward a lower open across the board for the dow, the nasdaq, the s&p 500.
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but nonetheless, the dow and the s&p 500 could have their best six-month or rather their best august, i should say in nine years. not since 2000 have they had an august rally like this one that we have just seen. and, of course, with stocks looking like they are going to be in retreat today, let's move on to the treasury market where we will probably see the price go up and yes the yield come down although ever so slightly right now at 3.43%. louisa? >> yeah, thanks. well, today we need to discuss what's coming up in terms of the economic numbers. a global chief economist, let's start very close to home and get your take on what we should be anticipating from the flash inflation estimates that we have out for the euro zone in perhaps half an hour's time or so. what are you looking for? >> well, actually the most important figure is probably the core inflation numbers and headline inflation. headline inflation might take up
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a little bit, probably the lower headline inflation has been seen now. but the current inflation might go lower first with weak demand in europe dragging down the overall index. so basically we should see a retreat in core inflation, which may raise worries about deflation or at least calm down worries about inflation. >> yeah. maybe also just underscore that rates aren't going to be heading higher at any point in the near future, or are they? when do you think rates could potentially head higher? >> well, i don't see rates heading higher for a considerable period of time. actually, we don't expect them to rise until the end of next year basically, also in europe. there's no question about that. inflation is still going lower and we think that this recession, which has hit europe
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hard will have an effect on prices and hike interest rates. >> hi, this is christine. what's your outlook on india? we have the economy growing 6.1% in the june quarter. how sustainable is it once this sort of stimulus kind of wears off? >> well, it seems that, you know, all those countries that have been hit much harder than the u.s. itself, the u.s. was the epicenter of the crisis, but all the asia countries have been hit much harder and have fallen down further. so they rebound also in a stronger fashion. i think this is just a rebound of, you know, looking like more recovery potential. but i think, you know, as the u.s. is also picking up speed now in the third quarter. we should be quite a sustainable recovery across asia. >> yeah. we also have in japan, of course, a new government in place. we also have mixed data coming out, japan today. we have industrial output better than expected growing 1.9% in
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july, but retail sales also falling in july, as well. how do you think all of this is going to weigh on the bank of japan? >> well, we think that the bank of japan is going to keep the monetary policy for a considerable period of time. but certainly what we are now seeing is at least if you look at industrial production, it's looking pretty v-shaped what we see from that side. of course, consumption is still weak with unemployment rising, but that's a lagging indicator. i would rather look at the industrial side of things. and it really looks much brighter than anyone had expected. we're at the fourth month of a rise in industrial production, but it will take a very long while before really industrial production reaches its normal capacity utilization and then prompt the bank of japan to raise interest rates. that will be only in 2011 maybe. >> this is mike in the states, and speaking of industrial
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production where we do get the chicago pmi number today, we get the ims report tomorrow, i'm assuming you're going to say that it's the unemployment report we're going to get on friday. that is the most important economic data point of the week. but does it matter that probably hard any anybody's going to be around to hear any of this since we're heading into the labor day end of summer holiday weekend here in the states? >> yes, right. but i think the most important data release will be the ism. because it's clearly the leading indicator and it's really pointing upward. and we wouldn't be surprised if we saw the ism reaching above the expansion level of 50, which would be very good news now that the u.s. is on a recovery path. i think the employment report is probably overstated. it's a lagging indicator. although we've seen also some confirmation of the good news
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from the industrial side from the ism and the labor market reports, we might see even better numbers on friday, but i think it's just a lagging indicator and it shouldn't be overestimated. >> yeah, i think i transposed my abbreviation, it's ism, of course. the "wall street journal" is reporting today in a nutshell that the commercial real estate market is going to be the next big shoe to drop. so should investors be bracing themselves for another huge round of big bank losses because of that? >> well, we think that there are some losses still in store with credit cards delinquencies rising and, of course, commercial real estate still being a crucial point here problematic point, but i think banks are now reasonably strong enough, have raised enough capital in the meantime to withstand this shock and
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therefore we don't think that this will be a very strong impact on the economy going forward. >> all right, we'll have to leave it there, thanks for being with us. well, let's go to a situation where we're looking at very closely over in japan. voters there swept the country's main opposition party to a historic victory over the weekend. ending a 50 -- almost 50-year rule by the liberal democratic party. for more, let's go live from the nikkei in tokyo. >> hello, christine. it indeed was an enormous landslide victory for the democratic party of japan. which won 308 seats out of 480, nearly three times of what they held previously. voter turnout also reached nearly 70%, the highest since the current election system was put in place 14 years ago. the incumbent liberal democratic party was delivered a crushing defeat. many political heavy weights lost their seats and were ousted
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from power after more than half a century of near uninterrupted rule. it was the first time for a serious contender to challenge them and could be the beginning of a two-party system. however, it's seen less an an overwhelming support for the dtj rather than a punishment toward the incumbent. more focus on who lost their seats than those who won them. frustration with politics as usual and a willingness to gamble for something new. the dpj leader is expected to be elected as the next prime minister in a special session scheduled for mid september. one of his first tasks will be to put together a new budget and it will be watched closely. in a press conference last night, he reassured voters that to support and improve their livelihoods would always be top priority. economists and market observers say dpj proposals such
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as eliminating highway tolls could help stimulate household spending and boost domestic demand. but how to finance these measures will be one of the major challenges. back to you, christine. >> thank you very much. let's get some analysis on japan right now. and joining us now we have michael whit, professor of asian business. good to have you with us. the japanese yen getting brought up on hopes there's a new government put in place, policies to spur consumer spending. ruling ldp party took a long time to get that going. do you think that the dpj has that answer? >> the dpj in my view doesn't have the answer just like anybody else is really unlikely to have an answer to this question. consumer spending is basically in the hands of the consumers and their discretion. one thing that the dpj could do is create an environment which has more certainty around the future economic outlook. but the policies that have been
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proposed in the election campaign is very questionable whether these policies will create this atmosphere or comfort that might make japanese consumers well spent. >> speaking of policies, this is the government, hatoyama, untested, do they have the tools? do they have the ability? a lot of concerns they might overspend to get things going. that's a key risk, isn't it? >> there certainly is a risk in overspending because in the election campaign as we have just heard, many promises were made in terms of additional outlays by the japanese government. the problem with that is that the government budget deficit, and these days is coming close to 200% of gdp. it's not really clear whether room for spending would come from. hatoyama indicated they would cut wasteful spending and other areas. where this is possible, whether this is possible, that's very much open to questioning at this point. >> michael, this is mike huckman
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in the states. and with the democrats winning control in japan, to what ext t extent, if any, do you think that puts the japanese administration more in line, more in sync with the american administration and what impact, if any, do you think that has on the global economy if at all? >> my expectation is that actually the impact on u.s.-japan relations will be actually fairly minimal. hatoyama and the dpj said they would seek to be more independent of american policy, but at the same time, constantly reemphasize the fact that the relationship with the united states will remain a corner stone of japanese foreign policy. my expectation would be that certainly hatoyama government would try to work closely with an obama government in terms of international policy responses. >> michael, it's louisa, in the
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past certain officials have been critical toward the bank of japan's monetary policy. what type of relationship do you think that the democrats now have with the bank of japan? and are we going to see changes there? >> well, formally the bank of japan is entirely independent and government is not meant to interfere. in practice, any central bank, the bank of japan, of course, needs to make sure that it keeps its political overlords happy. and in this respect or for this reason, i would expect the bank of japan to try to basically work closely with the japanese government. on taking whatever steps are necessary to prevent a deflationary spiral. >> just a quick question for me, do you think the dpj can deliver in the first 100 days to deliver. what's going to be key here? >> i think we'll have a very, very hard time. they make many promises that i think they really cannot sustain because there's no money there. made some promises that do not
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require money, such as a promise of bureaucratic reform, weaken the bureaucracy. the problem is they need the bureaucracy that it has planned. so it's a catch 22. if you attack the bureaucracy, you may have nobody to implement your policies. if you do not attack the bureaucracy, you may have nothing to show. >> all right. it's going to be very tricky. we'll have to wait and see. michael, thank you very much for being with us. very good talking to you. professor of asian business. we've been talking a lot about japan, let's talk about india. live from mumbai for the india business report. hel hello ayesha. >> early morning for the markets, now beginning. up almost 4% right now. it's almost 265 or .4 that we're
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currently staring at. outperforming and we're holding up and now beginning to inch lower, so you do have the midcap index down .5% or so. they're going to come up with the consolidated number, besides that, we have the gdp data come out, the market really seems a little unmoved by the gdp numbers perhaps because it's factored in and it was also in line with what the street was expecting it to come in we were expecting a figure of almost 6.2%, but definitely there has been an uptick in terms of construction and the full year rate to come in anywhere from 6% to 6.5% odd%. the company has approved, so -- 52% holding and investments, that stock is up, upper circuit.
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the promoter will now be making an open offer. that is definitely in focus. in the meantime, the crack's really on the market are deepening, we're staring at points. the sensex. for now, back to you. >> ayesha live from mumbai. elsewhere, six parties reportedly ready to lend glencore in exchange for the stakes in the biggest commodity trader. glencore posted a 57% drop in first half net income. china's $200 billion fund is also considering opening a major office in new york. as part of a service to step up overseas investment, the cic chairman says they're investing billions as markets pick up. and chinese markets will once again face a sludge of new shares.
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mcc started marketing the $2.5 billion ipo for subdiscriminations next week. the china listing is slated for september 21st. the firm also hopes to raise another $2.3 billion in a hong kong ipo, which will debut on the 24th of september. louisa? the uk government has staunchly denied that the controversial release of the lockerbie bomber had anything to do with oil deals. revealed letters written by justice secretary jack straw two years ago. in one later he stated it was in the overwhelming interests of the united kingdom that convicted bomber not be excluded from a transfer agreement with libya. weeks after this letter was given bp and libya agreed on a massive oil exploration deal. however mr. straw has critically pointed out that megrahi was released on compassionate grounds adding he has no power
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to make such a deal anyway. >> i would not have done a deal, but i have no power to do a deal and to say to the libyans, well, we'll do a murky deal with you on oil and give you a wink about the release of mr. megrahi because that was not within the jurisdiction of the united kingdom government. meanwhile over here in the united states, investors are running for the exits in the wake of the private equity firm's losing bet on the u.s. auto industry. the "wall street journal" says clients are pulling more than $5.5 billion, that's 71% of the hedge fund assets in response to losses in their own cash needs. cerberus' investment in chrysler was wiped out when the automaker filed for bankruptcy. it was forced to give up the stake when bailed out by the u.s. government. cerberus is not alone. the u.s. government has raked in about $4 billion in profits from big banks that have
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repaid their bailout loans. critics of the $700 billion t.a.r.p. were concerned the treasury department would never see a return on its investment. but the government has already claimed money from eight big banks, including goldman sachs and morgan stanley. however, the u.s. could still lose money that it spent to bailout the likes of citigroup, bank of america, aig, fannie mae, and freddie mac. didn't catch an interview on "worldwide exchangeexchange" wa find out more? a lot moving at cnbc.com. and still to come on "worldwide exchange," the yen has gained versus other currencies following the results of historic elections which saw a victory from the democrats and an end to a 50-year rule from the liberal democratic party. we will bring you more on this. but before that, here's how the dollar is performing in today's session as a result of that election.
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welcome back, we need to focus in on the currency markets now. i know many of you follow this very closely. we've seen a bit of action in the dollar yen. down by .7%.
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the head of forex research. and we've seen a broad-based buying in the yen as the opposition party won the election victory in japan. is this going to continue, do you think for the near term? >> no, i don't think. i think the was a little bit after the election results because the situation in japan is so depressive. everything that changes the situation might be taken as better. i don't think we'll see a chance of a prolonged yen strength at the moment. >> uric, hi, this is christine, what are the chances of it falling down again? >> well, look, i think the new election result was a clear signal, but nevertheless, i think the medium-term chances, the medium term problems of
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japan remain whatever government is in charge in tokyo. you have this huge deficit and therefore limited possibilities to counter any negative shocks on the real economy. this problem remains in place. whatever government is in charge and therefore i don't think that the market will use this election result as a trigger for prolonged yen strength. i think it was short-term lived and should be worse in the medium term. >> urich, how much do you expect the dollar to get buffetted by the ism report, and the jobs report coming on friday? >> look, in the last couple of quarters, actually, good u.s. data were not positive for the u.s. dollar. because good u.s. dollar were taken as a sign that the crisis is over or near its end and
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therefore were taking -- as indication to move out of the safe havens u.s. dollar currency. but since it has changed recently and now good u.s. data are becoming more and more positive signal for the u.s. dollar. i expect this to remain in place. and therefore good economic data should help the dollar this week. >> but urich, we're heading into september-october, historically the worst months for equities. and so if that happens and, of course, there's a raging debate over whether that's going to happen over the big rally we've had, how do you expect the dollar to behave over that period? >> well, if you only focus on equities, there's this old in place. a good equity market is bad for the u.s. dollar, bad equity market is good for the u.s. dollar. the perfect storm would be something where we see a good economic data but a weak equity
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market. this would be very positive for the u.s. dollar. and i think the scenario, which is quite high likelihood because the equity market has gone far. therefore from a valuation perspective, might not be too much room for them and even some room for corrections. at the same time, economic data should surprise on the up side and this is perfect for the u.s. dollar. >> what's your favorite at the moment, urich? >> sorry? >> what's your favorite investment at the moment? >> well, we still like very much the u.s. dollar, but overall nevertheless in the medium term perspective, we also like the commodity currencies. like aussie, and at the same time, as i said, i think a yen has gone very far due to the short-term effects and i think there might be some correction. and even the euro is not a very favorable. being short on euro and yen
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being long on aussie and to the u.s. dollar. >> all right. ullrich, thank you very much for your thoughts. ulrich. coming up next, we'll continue to focus on headlines across the globe. and also u.s. markets within the best rallies since 1933. send your thoughts in worldwide@cnbc.com.
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i'm christine tan in asia. chinese stocks fly 6.7%, marking their second biggest monthly loss in 15 years. >> i'm louisa bojesen, markets are following the asia's down trends, but london is closed for a holiday. and i'm mike huckman in the united states, the final week of summer could be anything but relaxing for investors with the crucial jobs report coming out on friday. all right. welcome back, and if you're just joining us from the u.s., welcome to those viewers, as well. you are watching worldwide exchange as said, and we're just looking at some euro zone inflation figures hitting the
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wire. august cpi for the euro zone, estimate down by 0.2% versus july 0.7% lower. these are the flash estimates for the pre-figures we're getting. 0.3% according to the dow jones news wires, but again, we are looking at a drop that was a little bit less than that 0.2%. and again, it's moderating from the drop we saw in july. just seeing if there's any euro dollar reaction on the screen right now. not a whole lot. bit flattish, 142.88 is what it says, but not a whole lot of data out from the euro zone either, but that would be one of the bigger pieces of data. be interesting to see what the core inflation versus the headline figure. let's show you the global index, as well, kicked off a new week and the uk is out for a bank holiday. but the overall cnbc global index, broad based lower by .5%, we opened on a slight let lower
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footing, and slowing in autos, daimler's pulling down, selling in some of the chemicals out there and selling in the construction sector, as well. the currency markets, we were just talking currency a second ago. and if you're just joining us, we're looking at buying in the yen here in the overnight session on the back of the overwhelming landslide victory for the democrats and in japan in the latest election. let's talk about what's taking place state side. mike? >> well, louisa, thanks. we're still 4 1/2 hours away from the opening bell, but it looks like either a, or maybe it's both of these things that we're going to follow suit as to what's going on in asia today. we do have the futures pointing toward a lower open at this point. and b, maybe it's an early start to that september-october selloff that a lot of people have been calling and arguing for in the wake, especially of the big summer rally that we
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have had lately. nonetheless, we are looking for the best six-month equity move barring a huge meltdown today since 1933. so a long established record there. moving on to the treasury markets, you would expect that as stocks pull back that the price is going to go up and that the yield is going to come down. but at the moment, the yield on the bund is ticking up at 2.5% and moving on to the benchmark ten-year treasury note here in the states, it is down. but just a tad at 3.43%. christine, over to you. >> hey, mike, while as louisa mentioned that landslide victory, of course, in japan over the week. the dpj coming into power. really weighing on the markets, that send the japanese yen, of course, higher, pulling down some of the exporters, 4.4%, that's how the finish ended, the kospi down 1%. hang seng, this market is up
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some 60%, just a healthy correction, a lot of people saying but that is causing jitters across the region. hang seng 1.8%, and the sensex is down 1.6%. this is how the picture is looking. lots of concerns the fallen and chinese equity market stoking fears about demand coming from the chinese economy, crude is down 1.12, down 1.5%, $71.61 a barrel. well, plenty of issues to talk about. joining us now for the next hour, chief investment officer. good to have you with us. obviously when you see the chinese market tank like that 6.7%, you have to say, hang on, this is healthy correction, but why are people so nervous? >> well, christine, i don't think too many people knew why the market went up so much, therefore they don't know why the market is going down either. it is the -- the reasons why it is causing jitter is because
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china was the first country to come out of the global slump, and therefore they think things are beginning to stall there, then they begin to wonder if it'll happen elsewhere, as well and that is the reason why china market turmoil causes more than proportionate because it has become right or wrong trend setter for many investors. >> let's take a look at japan, that story again today. we have a new government in place, dpj winning by landslide victory. how hopeful are you that change is going to come about? new policies for reviving the economy. >> i think hope springs eternal. we had winning twice and second time he withdrew after one year, things didn't happen. this time we should be cautious. i think, again, to use a phrase, i am cautiously optimistic on japan because the manifesto in my view wasn't as populoused as people make it out to be. and the size of the mandate they
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have got, i hope they'll implement what they said in the manifesto. you saw i think that'll be a very powerful case for asian decoupling. >> asian decoupling, but by how much, sir? >> well, i think as i said, it is the precondition is that the dpj implements what it said in its manifesto. and if they do that, then basically japan with its size can hope to be the end destination for asian exporters in sort of the u.s. so in that sense, i think dpj that lives by its mandate can make sure that asia has a self-contained regional dynamic. the percentage asia has already demand in the last eight years that it has been able to hold its own vote in the falling markets and in the rising market. the question is, whether it can buck the direction in the u.s. and i think that's where the jury is still out for asia and if japan really lives by what they have said, then that prospect comes a little bit
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closer. >> what are your views on what's going on in the u.s., for example, in the markets there, do you think we're seeing overheating? nasdaq has seen the best in the last six months or so. should we be taking profits in the u.s.? >> oh, indeed, yes. the short answer is yes. we should be taking profits. i think the stock markets have run way too ahead of the potential improvement in the macro situation. the improvement is because of the massive stimulus efforts. i think the private demand situation is still weak. the u.s. will eventually recover. but the question is, one of timing on the pace and there, i think, the market is discounting a much more normal recovery than what is likely to be the case given the scale of the problems we had in 2008. >> this is mike huckman in the states, but what about the trillions of dollars that are supposedly still sitting on the sidelines and that many are saying could come back into the
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equity markets shortly after the labor day holiday this coming weekend? >> the trillions of dollars that are sitting on the sidelines probably have their own uses, as well, in terms of paying back the debt that have been accumulated over time. and if liquidity as always being the answer to the problems solution to asset markets, why isn't the fed cutting down the rates? experiencing double digit losses in '01 and '02, and also in '07, every central bank in the world the system of liquidity, was we still had 2008. i think at the end of the day fundamentals do come back to reassert themselves, liquidity does hold its sway over limited periods of time. and therefore, i do not believe that one should set so much store simply because the cash is sitting on the sidelines. there is no cash sitting on the
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sideline. asian and money market accounts is probably needed to pay back the debt on the wide foreclosures on negative equity situations. i think we should not overemphasize that aspect. >> what should they be doing with their money then? >> well, at the moment, we have told them to either take profits or even enter into positions on markets like china, even s&p 500, our u.s. financial -- market that go up and the market goes down. >> okay. >> we therefore feel this is a time to be on the different. we do believe we're not going to repeat the worst of 2008 situation, but at the same time the kind of rally we have seen in equity markets is way ahead of itself. >> okay. continue to stay with us, of course you're our guest host for the next hour. he's our guest. if you have any questions, do send them to us worldwide@cnbc.com. mike, over to you. >> thanks, christine. and still to come on
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"worldwide exchange," should the federal reserve be subject to a complete audit? one powerful u.s. congressman thinks so. we'll bring you more on that story after this break. businesses more efficiently, so we've brought in a team of experts to help. one suggestion is to make your shipping more efficient with priority mail flat rate boxes from the postal service. call or go online for a free supply and up to $160 in offers from authorized postage vendors. shipping's a hassle! weighing every box... actually, with flat rate boxes you don't need to weigh anything under 70 pounds. if it fits, it ships for a low flat rate. ok, but i ship all over the country. you can ship anywhere in the country for a low flat rate. ship international, too. yes, but i ship hundreds of things, in all sizes. great, because flat rate boxes come in four sizes. call now and we'll send a free supply, plus up to $160 in offers.
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and welcome back to "worldwide exchange." business economists are splits
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on whether the fed's massive infusion of cash will spur higher inflation over the next few years. and the latest poll for the national association of business economics, half the forecasters say the fed's decision to increase the money supply won't lead to inflation. some 41%, though, disagreed citing an ineffective exit strategy as a main concern. members were more in agreement on overall monetary policy with 70% saying it was about right, more than half believe the fed will keep interest rates stable over the next six months. in the meantime, the head of aig's aircraft leasing unit is in talks to buy part of the business. the "wall street journal" says steven haze is in early discussions to purchase about $2 billion of ilfc's portfolio. he plans to use it to start a rival business, ilfc's fleet is valued at a little more than $40 billion. the business has been on the auction block for nearly a year now. aig has yet to find a buyer.
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aig closed up 5% on friday above $50. $50.23 to be exact. in the meantime, the administer is preparing a $100 billion claim of lehman brothers. and louisa is going to tell us more about that. >> yes, i am. all the claims have to be put into the system before the 22nd of september. but they're preparing these claims. their claims stating against the company and they're currently working with more than 100 companies mainly in the uk to prepare these cases, but they have to be submitted to the u.s. bankruptcy court by the 22nd of september. i should have lip synced, shouldn't i. you could talk and i would be lip syncing. 20 miles of colorful parades, exotic smells, maybe garbage, and deafening sound systems, currently hosting the 43rd year of the biggest street festival in europe, the noting hill
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carnival got off to a peaceful start despite violence in the past. organizers say security is better than ever thanks to funding from a new sponsorship deal and party-goers continue celebrations today because there's this public holiday in the uk. do you like that, christine? is that something you'd go to if you could, the carnival? >> i'm seeing another side of you that's quite amusing, actually, louisa. >> yeah. >> i was there by mistake on saturday and they were barricading all of the stores, putting up blockages in front of the store windows because of the looting that's traditionally also tends to take place of broken windows. i guess it is fun. it's a big celebration, right, if you like that kind of stuff. >> it looks like fun. it looks like fun. it looks like fun. well, on a serious note, in japan, economic data to tell you about. industrial output rising to a better than expected 1.9% in
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july, thanks to rising vehicle demand. that's the fifth straight month of gains and indicates japan's slow recovery after entering recession late last year. meanwhile retail sales painted a grim picture of the consumer after a 2.5% drop in demand from a year ago. it's the 11 consecutive month of decline, less than the 3% drop the market was expecting. also in japan, voters have swept the main opposition party to a historic victory over the weekend, ending a 50-year rule by the liberal democratic party. >> reporter: an historic moment in japanese politics as the democratic party sweeps power from the ruling ldp. decades of unfulfilled policies and a stagnant economy have led to unprecedented voter turnout. to overturn more than 50 years of almost continuous rule by the ldp.
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>> translator: we felt very strongly we had to change the politics and knew this election was about to shift in power. we would like to thank everyone who supported us to make this victory happen. >> reporter: prime minister taro aso stepped down as leader of his party to take responsibility for the humiliating defeat. >> translator: we couldn't wipe away the discontent of the japanese people, and therefore, i believe i need to take responsibility for this. >> reporter: but the democratic party's landslide victory is just the beginning. at the foremost of concern over the untested party is the lack of experience in government. >> translator: there isn't a proper leader, i really don't think the dpj can change the government. >> reporter: i am against the dpj, japan was very good until now. but some analysts say while the party may be new to government, it's filled with many
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experienced hands. >> please, let's have a look at the people who the democrats actually pose. who are going to be the leaders. they're very experienced, they've been around the block, a lot of them are exbureaucrats, they know what they're doing policy-wise. >> reporter: the incoming premiere is promising to give the people what they want, job stability and money in their hands. he will also have to learn to work with japan's bureaucrats, once revered for turning japan into an economic power house, but now accused of corruption and waste. >> i think it sends a signal to bureaucracy, they'll have to think twice thousand they challenge a dpj government. the balance really shift in politicians. >> reporter: while popular policies may have swept the dpj to power, on national security and foreign relations, the party remains unclear. they say they want to foster closer ties with asia.
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hatoyama's first step on the national stage is likely to be in pittsburgh for the g-20. he will be pressed to outline how he plans to steer japan out of the worst post-war recession. cnbc, tokyo. let's get back to chief investment officer at bank julius baer. you saw the package. a lot of the victories some were saying was driven not by the support of the dpj. very inexperienced, are you concerned, maybe, that they will have -- they might have a little bit of trouble getting the economy back into shape? >> well, perhaps yes, but i wouldn't give it too much of importance. i think the ldp has been feared, but i think fresh face and new thinking can help. look at the manifesto. they have some good ideas on incentivizing having more children, et cetera. i think this is the right thing
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japan needs in terms of the aging problems. all the dpj needs to do is live according to the manifesto. if they deliver on it, i think they'll surprise a lot. >> there's a concern they could overspend, is that a key risk for you? >> it could be a risk, but i was also impressed with the fact that they have outlined item by item, reduction in some areas, which will fund their fiscal new initiatives. i thought it was a good thing to write. so i think they have not been as responsible as being made out to be in my view. >> we'll have to leave it at that. plenty of things to ask you still, bank julius baer. coming up on the show, the party suffers losses in a german regional election. how will this affect her chances? as the country federal polls next month. plus a commercial mortgage back securities. we'd like to hear your thoughts. e-mail us worldwide@cnbc.com.
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9. ♪ singer: buckle up, everybody 'cause we're taking a ride ♪
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♪ that can strain your relationships and hurt your pride ♪ ♪ it's the credit roller coaster ♪ ♪ and as you can see it kinda bites! ♪ ♪ so sing the lyrics with me: ♪ when your debt goes up your score goes down ♪ ♪ when you pay a little off it goes the other way 'round ♪ ♪ it's just the same for everybody, every boy and girl ♪ ♪ the credit roller coaster makes you wanna hurl ♪ ♪ so throw your hands in the air, and wave 'em around ♪ ♪ like a wanna-be frat boy trying to get down ♪ ♪ then bring 'em right back to where your laptop's at... ♪ ♪ log on to free credit report dot com - stat! ♪ vo: free credit score and report with enrollment in triple advantage. hi there. welcome back. on to our global equity market round-up. almost like kind of, i don't know, melons lying in a circle, right? we've got sylvia, stephon in
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paris, and ana out of singapore. start with one of you silvia. >> mentioning melons can be something very tricky in this kind of scenario, but be that as it may, we, of course, have the elections to digest, the regional elections. in all honesty, it's probably the slump in china that hit us more on the head here this morning than the elections itself. but whatever came out of the elections was a result full. merkel her party lost surprising ground in two of the three elections they lost their majority, and it's doubtful whether they will return to power in both these states. the spd, of course, is pretty much up sugar creek. that was expected it leaves a sense of insecurity for the outcome for next month's federal elections because all the scenarios are there not very pleasant for the voter and maybe not pleasant for the economy.
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they would hope for a center right coalition, but that is at the moment, at least in the proper probably a tricky scenario. the market itself dare i mention potatoes, because that's what we're doing here, jumping in and out of the markets here. actually it's a farmer to jump in and out of the potato fields. and this market more or less technical, the lid at 5,572, and that's what we're not clearing, at the moment, taking money off the table. stephon? >> the banks are trading lower. the french government decided to step up the plan to fight against tax evasion. the budget minister announced the government released 3,000 people, possibly a tax evader and have accounts in switzerland, also say that the government is going to open the negotiations with the banks in france to the least of people
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will have investments abroad so the banks are trading lower, we've got the trend declining today after a report that the company is going to counsel because of results. it's up 1.5%, and also trading lower. it's an investment group and the company posted a net loss of 960 million euro, and the guidance for the full year expecting a possible loss for 2009. let's have a look now at the asian markets in singapore. >> thank you very much, stephon. well, the asian markets did not kick off the week on a positive note. in fact the rotten apples came from the shanghai. the biggest loser in the asian region. this saw heavy capitulation dropping to three-month lows here. as there's really a sense that overall the corporate earnings have not held up with the pace
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of gain that we've seen in the equity markets, at least until july when the shanghai at the high point was up about 90%. we saw heavy selling across the board. and a lot of concerns particularly on the financial space given there's more liquidity concerns coming of the market in two ways. one, of course, more ipos that will be hitting the shanghai and hong kong markets. and both these equity markets as well as at the existing companies, last week raising $1.6 billion or planning to at least issuances. and after the bell last friday, looking to raise even more money up to about $3.2 billion u.s., and also this is coming amid slowing banking in the month of august. overall, it really was not too good of a day for the equity market. that note back to mike in the u.s. good morning. thanks, adam, and good afternoon to you. and we'll find out if this
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summer rally will continue as we get a week full of economic data with reports on manufacturing, productivity, the minutes from this month's fed meeting and of course the non-farm payroll data that comes out on friday. today, though one notable item, the august chicago pmi out at 9:45 a.m. new york time that's up five points from july and that's your very short global stock watch. coming up japan's democratic party sweeps into power ending the liberal democrats. is the new ruling party up to the top? and also, will commercial mortgage back securities become the new casualty of the economic downturn? we'll find out after the break. as per usual, worldwide@cnbc.com.
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and it is 30 minutes past the hour right now. here are the top stories from around the world here on worldwide exchange. congressman barney frank, the chairman of the house financial services committee is planning
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legislation to subject the fed to a complete audit. well, at the town hall meeting, frank says that the bill would crack open the central bankbooks, but not in a way on monetary policy. you know what? let's get straight into our markets. and it looks like here in the united states, four hours before the opening bell that we are going to follow suit what's been going on in china and asia overnight. or maybe it's also just a continuation of what happened in the stock markets on friday. or maybe it's just an early start to what some have been calling for as far as september-october pull-off, pullback, correction, or selloff in the wake of the big summer rally that we have. but yes, at this point, the futures are pointing toward a lower open. in about four hour's time.
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moving on to the treasury market, we're going to take a look at the yield on the ten-year tear note, and it is pulling back as it appears that investors are going to roll out of equities and back into the treasury markets. louisa? >> yeah, also in the end, mike, it's always good. let's show our european because we've been trading a little bit lower on the morning. london's not open because of a bank holiday taking place in the uk, but the smi, b cac, and dax all lower. the cac 40 has increased a little bit, but approximately .7%, looking at some of the cac stocks and l loreal. dollar cross rates, a lot of activity in yen buying after we had the landslide election victory by the democrats in japan.
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that taking place over the weekend. in fact, let's talk more about the asian markets. christine? >> hey, that landslide victory, dpj coming into power. that sent the japanese yen higher and that hit the exporters, pulled it down 0.5%, the kospi down 1%, shanghai diving 6.7%. a lot of talk about bank lending being curbed. a lot of concerns there, and that dragged down the hong kong market down 1.8% and the sensex in india trading down 1.6%, a very dismal session here in asia. in terms of nymex crude, oil picture, it is pulling back more than $1, crude drifting the $70 mark, $71.14 a barrel, down $1.16, a lot of concerns there, of course, fall fallen chinese equity market could hurt demand
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coming from the chinese economy. on that note, let me send it over to you, mike. >> thanks, christine. joining us now for some market strategy is the chief investment strategist at lp. and still with us is our guest host for the hour, the cio of julius baer. and over the weekend was argued that this has been a very broad rally, broader than a lot of critics have said it was. but then there was an op ed piece that i saw in the financial times over the weekend that classified this as a dash for trash as far as the summer rally is concerned. so in your opinion, has this been a real rally or a junk rally? >> well, i think it's actually been a real rally. i feel like the s&p 500 is kind of fair valued around 900 to 950, i think we are a little bit overbought, and that's what you have when you look at the fannie maes and the aigs, that's
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getting too aggressive, but the important thing is this rally has helped us to set in hopefully what a floor is on this market. if it's been a junk rally, i don't anticipate the pullback of being more than about 10%. you have had a nice rally in good quality names too such as a microsoft or some of the other tech sector names and of course all of the commodity names have performed well, as well. >> and real or junk? >> i would probably err on the side of calling it a junk rally because the outperformance of stocks compared to stocks that are priced at more than $40, very graphically brought it out in the news letter at the end of july. and also if you look at in terms of the stocks that are performing and participating in this rally, it's clearly the case of liquidity and the cash for clunkers program driving this hopeful rebound rather than
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anything that is fundamentally sustainable. >> jud, how has your portfolio changed in the past month or so alone? we've seen so much movement on the up side. what changes are you looking to make in september? >> well, i'm trying -- what i'm trying to find is i'm trying to invest in stocks that have limited downside so they may not have the explosive growth to the up side. i'd be looking to get out of a lot of the names that had a big rally. some of the names that had leverage on the commodity side, i'd be looking to sell out of those and get into more health care names or names with another way to describe it, names with a lower beta. i might not -- if we have a big rally to the up side, i might miss out a little bit, but i feel like i'm giving up that up side in exchange for being protected a little bit if we have kind of a 10% pullback to the downside. good strong dividend paying name. i might be rolling into things that are more defensive.
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>> you're getting out, commodities, what about financials, do you like them? >> i do not like them. i think those are names where if things continue, if it truly is a junk rally, i think we're going to get a pullback in those names, so i don't like the risk-reward profile. but i'm not super bullish, but for people who are, that's where you want to be looking at those financial names because they have leverage to the up side. but personally, i think there's too much risk in those right now. >> you agree? >> i think, yeah, very much so. i think there is too much risk on the financial names and also i think i would be doing what all he's saying in terms of defensive stocks and dividend yielding ones. >> what about commodities. >> i think they're also due for correction. because the hope for global recovery around the corn, especially energy and base metals, i think they're way too overpriced. and could i just follow up, as well and make sure we get
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disclosures from both of you. jud any disclosures on companies so far? >> well, we've been, for example, proctor & gamble my company does have positions in there, i personally don't have any, but the company i work for does. >> doctor, and you? >> yeah, i don't have any disclosures to make because i look at the overall investment strategy, don't make specific calls on companies and specific release. >> all right. jud pyle, you're staying with us, we'll talk to you more in a few minutes. and doctor, the chief investment officer at bank julius baer, thanks for being our guest host for the majority of this hour. a hedge fund reportedly heading for the exits, we'll have the details coming up next. but before that, here's a look at how the united states futures are shaping up at the moment and this ain't pretty.
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welcome back to cnbc's worldwide exchange. here are some of the top stories we're watching from around the world. congressman barney frank who is the chairman of the u.s. house financial services committee is planning legislation to subject the fed to that complete audit.
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at a recent town hall meeting, congressman frank says the bill would crack open the central bank's biooks. frank also says the house will move to curb the fed's emergency lending powers to non-bank firms. both measures will be part of the broader financial regulation overhaul bill that is likely to pass the house in october. in the meantime, investors are running for the exits at cerberus capital. the "wall street journal" says clients are pulling more than $5.5 billion or 71% of the hedge funds assets in response to losses in their own cash needs. cerberus' cash investment was wiped out when it was forced to give up the stake in gmac when it was bailed out by the u.s. government. they are not alone, though, as other hedge funds are suffering, as well. and the u.s. government has raked in about $4 billion in
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profits from big banks that have repaid their bailout loans so far. critics of the $700 billion t.a.r.p. were concerned the treasury department would never see a return on its investment. but the government has already claimed money from eight big banks, including goldman sachs or morgan stanley. however the u.s. could still lose money if it's spent to bail out the likes of citigroup, bank of america, aig, fannie mae, and freddie mac. the administrators of the british arm of lehman brothers is preparing $100 billion claim against the former parent company in the u.s. price waterhouse coopers is currently working with more than 100 lehman units mainly in the uk to prepare these cases. all claims must be submitted to the u.s. bankruptcy court by the 22nd of december. while turning to japan, louisa, the central left opposition democrats won a crushing victory over the long-ruling liberal democratic party.
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now from the nikkei with more on the market's reaction. >> hello, hello. the impact of yesterday's election is still captivating people's attention here. the tokyo stock market welcomed the news of the coming change in government and the nikkei briefly touched the year-to-date high. but the resounding victory seemed to also have prompted buying in the yen market. and as the yen strengthened to the 92 yen range against the dollar, investors shifted to selling exporters. the democratic party of japan won 308 seats out of 480, nearly three times of what they held previously. the incumbent liberal democratic party was delivered a crushing defeat. many political heavy weights lost their seats and were ousted from power after more than half a century of near uninterrupted rule. hatoyama is expected to be
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elected the next prime minister scheduled for mid-september. one of his first tasks will be to put together a new budget and how and which of the promises made during the election are reflected will be watched closely. economists and market observers say dpj policies such as child rearing allowance and highway tolls could help stimulate household spending and boost domestic demand. but how to finance these measures will be one of the major challenges ahead. and that's all from tokyo, back to you. >> thank you very much. louisa? u.s. squawk box follows worldwide exchange for viewers in europe, asia, and the united states. becky tells us what to expect. >> good morning, louisa, good morning, everybody. we have a mega-monday ahead on "squawk box," steve liesman sitting down with bill dudley for an exclusive conversation. this is the first time that a sitting new york fed head has ever welcomed cameras into his office for an interview.
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steve's here, he's going to be anchoring with us this morning and he's got all of this conversation. so it is definitely something you want to listen in for. also, we are in a new york state of mind this morning, we have the city's mayor mike bloomberg who is also going to be joining us. speaking out on the state of the big apple. we'll be talking about tourism, the u.s. economy, what washington's doing and what he thinks it needs to be doing, as well. our other guest, robert shiller and bill roouden who is going to be our guest host joining us for two hours today. "squawk box" coming up at the top of the hour. and i'll tease you with this, as well, joe's out, carl's out, i told you steve was here. we've got another anchor too. do you know who it is? >> no, no, no -- >> stick around. >> of course, it is, i saw her last week. brilliant. well i'm sure you guys will have fun. girly fun.
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>> we will. we will. louisa, we'll send it back over to you and see you at the top of the hour. >> sounds good. have fun and we'll be watching from afar. we'll see you in a bit. up next on "worldwide exchange" the dow and s&p 500 are on track for the best performance since 2000. we'll look at the trading day ahead on wall street when we come back. my mother made the best toffee in the world. it's delicious. so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. robert shapiro: we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side.
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and welcome back to worldwide exchange. let's get a look at the trading day ahead here in the u.s. with jud pyle at peak6 investments. jud, we saw a down day on friday fractionally so with the exception of the nasdaq, we're going to at least open lower here in the united states. is this an early start to that september maybe october sell-off that a lot of people have been calling for? >> no, i don't think so. it's the last day of the month, and that i think the big deal we've got today is that we've got a lot of economic data
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coming up the rest of the week. i'm actually looking for things to be relatively unchanged. it wouldn't surprise me if in a couple hours here we start to rally back a little bit. i'm not looking for any big moves one way or another. we did have a day last week where we were almost unchanged on the day and wouldn't surprise me if we saw the same thing. a lot of data coming out later in the week and looking for today to be pretty dull. >> jud, earlier you mentioned you like proctor & gamble, you like health care, the ticker there cah, which by the way is going to spin off today and tomorrow its care fusion unit which will become part of the s&p 500, that's a company that takes care of hospital infections among other things. how do you feel about that? how are you playing that spin-off if at all? >> well, i'm not really -- the way i'm looking at it from a long perspective is that the new shares that you're going to get, i think, are probably fairly valued, as well and could have a
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little bit of up side, as well. so if you bought that stock today and you do wind up getting the shares of the spinoff, i think if you've invested $100 in it on percentage basis, everything will work out fine and that's one of those areas where i think that the february concern that the obama administration was going to be bad for health care, i think it's going to play out that things are not as bad as everybody expected. so and the reason i'm looking at health care is because the run we had i want things that were a little bit more defensive where you've got protection to the downside, cardinal fits that bill. >> jud, it's louisa, i've been asking people whom i've been meeting with over the past couple of months where they see an alternative investment at the moment. i mean, if you want to make sure that you have some type of an alternative investment in your portfolio, what would you be looking to? >> well, other than stocks, i'd be looking at corporate bonds. i'd be sure to take a look at that area. make sure you're not buying a
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stock where the corporate bond has a yield that you actually like better because obviously you rank higher on the capital structure there. so that's, again, a conservative way, i don't think we're going to get a massive pullback in the debt markets even if the yields start to go a little bit higher. and outside of that, the way that i'm looking at is i actually feel like oil is a little bit overvalued. so i'd be avoiding the commodities at these areas. but the corporate bonds, that's the area where i'd be looking if i was looking at something other than stocks. >> jud, this is christine, any interest in the emerging markets, maybe china? >> yeah, you know, china obviously with a pullback, with a pullback here today, personally, i don't -- i don't feel like the risk profile there of china is suitable. i'd rather be looking at maybe the smaller cap stocks around the world, but certainly there's a place for emerging markets, you know, 10% to 15% of the
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portfolio for any kind of diversified balance exposure to those areas. >> jud, this is mike again, any disclosures before we move on from cah either for you personally or the firm. >> for me personally, no, but for the firm we do trade actively in all of those stocks we discussed. >> so the "new york times" is reporting that insider selling this month grew to more than $6 billion, they're saying now it's the highest level since trim tabs, since they started keeping back in 2004. is that a bearish signal? >> i think, yes, it's one of the signals that certainly isn't bullish. that is one of those things where there's a better than 50% chance that those insiders are right as they're selling out, but from my perspective, i think what this rally has done for us is it's increased the likelihood that we will hold the 900 level
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on the s&p. if we do get a selloff in the month of september, historically a bad month for equities, i don't look for it to be more than about 10% down. >> well, actually, since 1900, september has seen dow up 42% of the time. it is the weakest when you look over the 12 months. i'm looking at nasdaq, as well, we're on track for a sixth straight month of gain. are you still buying tech? >> no, i'm not. i'm not buying tech, i feel like the risk-reward there isn't good enough to justify the fact that we might have a little bit of pullback. i'd be looking to get into tech if we get that pullback down 10%. so as a result, i'd rather not be buying tech now, i'd rather be buying companies that pay a little bit higher, dividends, and have a priced to earnings multiple that's a little bit lower than what you see in your average tech stock. >> jud, thank you very much. peak6 investments.
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we appreciate it. looking at our european markets, market action that we're seeing here as we're about to say good-bye to you. looking at relatively flat trade on smi, lower than .7%, krak lower than .75%. a little bit of selling on this place of the atlantic, mike. >> yeah, and in 3 1/2 hour's time when the opening bell rings here in the united states, looks like we will have selling here because the futures are pointing toward a lower open after a relatively down day on friday, just a fraction with the nasdaq trading slightly higher. and finally, the victory celebration may still be going on in california today. the winners of this year's little league world series, 13-year-old tiko garcia struck out the final batter capping off a come from behind victory over the team from taiwan. it's the fifth straight little league title from the u.s., but the first time a team from
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california has ever beaten one from taiwan. vice president joe biden who played little league baseball as a kid presented the championship trophy. and that's it for today's show, i'm mike huckman in the united states. >> i'm louisa bojesen in europe. >> and i'm christine tan, thanks for your company here on "worldwide exchange."
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good morning, everybody, happy monday morning. place your final trades right now because the month is coming to a close today. the dow on track for its best august in nine years, the s&p on a similar record pace. well, another shocker in shanghai, chinese stocks hit
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harder and the global markets are responding. and a cnbc exclusive. our steve liesman sits down with the new york fed president as "squawk box" begins right now. good morning, everybody, and welcome to "squawk box" right here on cnbc. joe and carl are out today, but these two are with me and it's great to see both of you. >> yes. >> feeling refreshed? >> i am, i'm feeling very refreshed. >> couldn't we ease us into this show? instead they jam pack it with all of this stuff. we've got the interview with dudley. >> no complaints by you. >> this is monday, we're back from a little vacation, and they hammer us. >> hey -- >> let us start a little later, instead they jam pack it with all of this stuff. >> steve's right, we do have a
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big show for you this morning. our guests this morning including real estate head hancoh reuben. we've got michael bloomberg on the list, robert shiller, the from the yale school of management, nasdaq ceo, and get ready, get your seat belts. >> not to mention i sat down with bill dudley for an exclusive and frank conversation. this is the first time that we know of, and the new york fed knows of that a sitting new york fed head has welcomed cameras for an interview. we talk about add whole range of issues from the state of economy, to political pressures on the central bank whether or not they made mistakes during the bubble, as well. >> hey, hold on. >> my view is that we have tools to manage our balance sheets so that we're not going to have an inflation outcome, bad inflation outcome. >> muche

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